Earnings from cryptocurrency listings
The cryptocurrency market is similar in structure and functioning to the stock market: there are trading platforms - exchanges, coins and tokens - analogues of stocks, as well as market makers and ordinary traders. Traditional companies list securities on exchanges to attract investment, while crypto projects list digital coins.
However, there are nuances in the blockchain industry that everyone who wants to trade or invest in crypto needs to consider. After reading this article, you will learn what a cryptocurrency listing is and how you can make money from it.
What is a listing?
Listing a project's tokens or coins to an exchange is adding them to the list of cryptocurrencies available for trading on the site. For many blockchain startups, listing their currency (called native currency) on a top cryptocurrency exchange becomes one of the most important criteria for further development. A successful launch allows not only to attract attention to the project, but also to significantly expand the audience of its users, give an opportunity to earn money to early investors and bring new ones.
Here it is appropriate to return to the analogy with the stock market: a successful IPO (initial public offering) of a company on one of the world's major stock exchanges will have a positive effect on the value of the shares which will increase the company's capitalization. Investors, noticing the positive dynamics, will begin to invest in these shares, which will further increase capitalization. And the higher a company is "worth" on the market, the easier it is to attract cheaper development credits. At the same time brand recognition and loyalty of potential clients increases.
In the cryptocurrency industry, a startup's native currency listing on an exchange performs essentially the same function. A successful launch ensures that the price of a token soars several times, which immediately attracts the attention of the industry media and crypto forums. At the same time, early investors get an opportunity to earn good money on their investments, while the project team gets free advertising and an influx of new users with serious money.
How to earn on the listing?
A good income on the listing is the desire not only of the project team, but also of ordinary traders. Developers, as a rule, keep a part of the native cryptocurrency in a special fund - "cash". Funds from it go to the development of token infrastructure and directly to pay for their labor. The more expensive a coin is, the greater the amount of fiat at the developers' disposal. By selling some of the funds from this fund, the creators of the startup can make a good profit without having a significant impact on the rate of their cryptocurrency.
Traders also have a chance to make solid profits - if they buy tokens immediately after the start of trading or much earlier, seeing the potential of the new cryptocurrency. Here are a few examples of the rise in the value of coins shortly after the start of trading on a major exchange:
AAVEUP. on November 26, 2020 - at the time of listing on Binance - trading started at a price of 9.7 USDT (USDT - Tether stablecoin, 1 USDT ≈ $1). A week later, the price of the token reached 26 USDT.
DF. The cryptocurrency price rose from 0.000178 ETH to 0.00056 ETH in 24 hours from the start of trading. Or from $0.11 to $0.33 according to the exchange rate at the time of listing on December 11-12 of the last year (1 ETH ≈ $600).
GRT. Trading started at 0.03 USDT per token. After 3 days, the value rose to 0.783 USDT - 260 times.
Of course, not all coins get such a boost from the new token listing bsc. There are also examples of early investors immediately after the start of trading who were too active in selling off the asset, and its price fell rather than grew:
HEGIC. During the day, the price fell from 0.2811 BUSD (own Stablecoin of the Binance exchange, 1 BUSD ≈ $1) to 0.2 BUSD.
ROSE. On the day of listing, the price of the token dropped almost 3 times in just a few hours after the start of trading.
How do I know about future listings?
Listing a cryptocurrency on a top exchange is not as simple a procedure as it may seem at first glance. Large exchanges do not add everything to the list of assets, but first they check applicants for compliance with internal criteria. The evaluation criteria are not disclosed, as well as the price paid by developers for reviewing the application or issuing permission for listing.
It is rumored that adding a new cryptocurrency on one of the major exchanges costs about 10-20 bitcoins on average. According to the same unconfirmed information, the most for access to its platform asks the cryptocurrency exchange number 1 in the world - Binance: from 250 bitcoins (more than $15 million!) And above. The second most appetite is Huobi: here the developers will have to shell out "only" $1.5-2 million.
Even studying only open sources allows us to draw some conclusions about the parameters that exchanges pay attention to (apart from money) when deciding about the cryptocurrency listing.
Binance. Compliance with KYC/AML requirements by applicants, real use of the project, popularity with the audience, cybersecurity.
Coinbase. Whether it meets the declared values of the exchange, whether it complies with legal requirements, how much market demand and supply, what it will bring to the industry.
Bitfinex. Project quality assessment, security audit, regulatory compliance, whether source code is open source.
Huobi. Strategic perspective of the startup, team, market activity, reliability, innovativeness.
Essentially, the project team has to prove its value, reliability, security and usefulness to any exchange.
Due to the fact that the listing of a cryptocurrency on a top exchange usually increases the value of the coins many times, the platforms prohibit the disclosure of information about the date of such an event. Otherwise, the launch can be postponed or even canceled completely. This is done to protect ordinary traders from speculative transactions from the big players.
But there are ways to be among the first buyers of the new asset. First of all, you need to monitor resources that publish information about upcoming listings taken from public sources. These are Coinmarketcap, Coindar, Cryptonews, Coimarketcal and official pages of exchanges. However, one can hardly find out the most profitable offers less than a day before or even post factum.
Second, participation in airdrops (free distribution of cryptoproject tokens) in the hope that in the future the project will be listed on one of the top exchanges.
Another good option would be to buy cryptocurrency immediately after the start of trading on the exchange. It is recommended to hold the purchased coins for 2-3 months after that. Usually after the "swing" of the first days, the value of startup tokens with great potential rises. As an example, you can see how the price of the native currency of the aforementioned projects changed:
AAVEUP - the token soared 3,800% after 2 months.
DF - the growth of 300% after 2 months.
GRT - plus 9,600% in the same period.
HEGIC - despite the 30% fall during the first 24 hours after listing, the value of the token increased by 300% after 3 months.
ROSE - three months after the unsuccessful launch, the token not only regained the lost positions, but also grew by 20%.
Based on this information, the most adequate strategy would be this approach:
Buying the currency of new projects as soon as they are added to the exchange.
Buying a large number of Coins for small amounts, instead of investing the entire deposit in one project.
Waiting for the growth of the price of your assets for a couple of months, while monitoring news about the progress of these projects.
Don't forget to monitor the bitcoin market sentiment as well, because it is an indicator of the state of the whole industry. If the first cryptocurrency goes into a prolonged decline, all altcoins will follow it.
The topic of listing would not be covered completely without mentioning the reverse process - delisting a cryptocurrency from a trading floor. As you have already guessed, this is the removal of a coin from trading for whatever reason.
Here are the most common options for an exchange to remove a cryptocurrency:
low trading volume. The coin is not interesting for traders, and no trading - no income for the exchange from commissions;
violations of regulatory requirements (it is much easier for the platform to "delist" the token than to fend off lawsuits in order to avoid being pressed by state authorities);
problems with project security or suspicion of fraud.
Delisting remains the exchange's protective mechanism against problematic or low-return projects. Naturally, "de-listing" causes the price of a coin to plummet, and it can even go to zero. True, exchanges give advance warning of cryptocurrency removal from the sites, giving users the opportunity to sell or withdraw assets in these tokens.
The release of a new cryptocurrency on a top exchange is a great chance to make money from this asset. Of course, no one can guarantee that the value of a young coin will definitely grow. But more often than not, that's exactly what happens.
To increase the chances of successful investment, it is necessary to keep abreast of news about young startups and plans for their development, to monitor profile forums and official pages of stock exchanges, to be able to independently evaluate the prospects of projects. All these activities in combination will help you get the most out of your personal investments.